The Nordstrom family, in partnership with Mexican retailer El Puerto de Liverpool SAB, is taking Nordstrom Inc. private in a $6.25 billion all-cash transaction. This move signals a strategic shift for the century-old department store chain, aiming for revitalization away from the pressures of the public market.
The deal, expected to close in the first half of 2025, will see Nordstrom shareholders receive $24.25 per share, a figure near the stock’s trading price following the announcement. The Nordstrom family will retain majority ownership at 50.1%, while Liverpool will hold 49.9%. This transaction reflects a significant discount from the $50 per share proposed in a failed 2018 take-private attempt.
This strategic decision comes after a challenging period for Nordstrom, with its stock plummeting 40% over the past five years, sharply contrasting with the Russell 1000 Index’s 80% surge. The company’s annual revenue, including credit card income, peaked in fiscal 2019 at $15.9 billion but has yet to recover to pre-pandemic levels. Current projections estimate total revenue of $14.9 billion for the current fiscal year.
Graph showing Nordstrom's stock performance
Morningstar analyst David Swartz suggests the timing of the offer is opportune, capitalizing on Nordstrom’s currently depressed results with the anticipation of future improvement. Going private shields Nordstrom from potential activist investor pressures, particularly given the company’s long-term decline under current management, according to Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
The US department store sector faces significant headwinds from online giants like Amazon and brand-specific stores. Competitors like Macy’s are downsizing, while Saks Fifth Avenue’s owners recently acquired Neiman Marcus. Nordstrom attempted to leverage its off-price chain, Nordstrom Rack, for growth, but inconsistent performance and strategic shifts have presented challenges.
Despite recent improvements in Rack’s sales following a strategic reversal, Nordstrom’s overall outlook remains subdued, projecting flat to 1% annual sales growth. This underscores the appeal of a private setting for navigating the complexities of department store operations and implementing long-term changes, as noted by Joel Bines, managing partner at Spruce Advisory. The Nordstrom family, in a direct communication to customers, expressed optimism about the future potential this transaction unlocks.
The financing for the acquisition will involve a combination of rollover equity from the Nordstrom family and Liverpool, cash commitments from Liverpool, borrowings under a new $1.2 billion ABL bank financing, and existing company cash reserves. A special dividend of up to 25 cents per share is also planned, contingent on the deal’s closure. Shareholder and regulatory approvals are pending.
Liverpool, a prominent Mexican department store chain with over 300 stores and a growing e-commerce and financial services presence, views the Nordstrom acquisition as a key diversification step. With a market capitalization of approximately $7 billion, Liverpool’s financial strength significantly outweighs Nordstrom’s $4 billion. This acquisition extends Liverpool’s reach into the US market, building upon its existing partnerships with international brands and its presence in Latin America.
Liverpool’s recent strong financial performance, with a 10% revenue increase in the third quarter, further reinforces its capacity to support this significant investment. This partnership positions both companies for a new chapter, aiming to navigate the evolving retail landscape and capitalize on emerging opportunities.
